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FAIR VALUE MEASUREMENT | 12 Months Ended
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Dec. 31, 2018
FAIR VALUE MEASUREMENT |
FAIR VALUE MEASUREMENT | 9. FAIR VALUE MEASUREMENT The Company measures at fair value its financial assets and liabilities by using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is the price that would be received from the sale of an asset or paid to transfer a liability (i.e., an exit price) on the measurement date in an orderly transaction between market participants. As of December 31, 2017 and 2018, the following financial assets and liabilities were measured at fair value on a recurring basis in periods subsequent to their initial recognition using the type of inputs shown as follows:
|  | Fair Value Measurements Using
|  | Total Fair |  | Quoted Prices |  | Significant |  |
|  | Value and |  | in Active |  | Other |  | Significant
|  | Carrying |  | Markets for |  | Observable |  | Unobservable
|  | Value on the |  | Identical Assets |  | Inputs |  | Inputs
At December 31, 2018 |  | Balance Sheets |  | (Level 1) |  | (Level 2) |  | (Level 3)
|  | $ |  | $ |  | $ |  | $
Assets: |  |  |  |  |  |  |  |
Foreign exchange forward contracts |  | 4,166 |  | — |  | 4,166 |  | —
Foreign exchange option contracts |  | 1 |  | — |  | 1 |  | —
Interest rate swap |  | 3,810 |  | — |  | 3,810 |  | —
Total assets |  | 7,977 |  | — |  | 7,977 |  | —
Liabilities: |  |  |  |  |  |  |  |
Foreign exchange forward contracts |  | 13,480 |  | — |  | 13,480 |  | —
Foreign exchange option contracts |  | 218 |  |  |  | 218 |  |
Total liabilities |  | 13,698 |  | — |  | 13,698 |  | —
|  | Fair Value Measurements Using
|  | Total Fair |  | Quoted Prices |  | Significant |  |
|  | Value and |  | in Active |  | Other |  | Significant
|  | Carrying |  | Markets for |  | Observable |  | Unobservable
|  | Value on the |  | Identical Assets |  | Inputs |  | Inputs
At December 31, 2017 |  | Balance Sheets |  | (Level 1) |  | (Level 2) |  | (Level 3)
|  | $ |  | $ |  | $ |  | $
Assets: |  |  |  |  |  |  |  |
Foreign exchange forward contracts |  | 12,316 |  | — |  | 12,316 |  | —
Commodity hedge |  | 3,416 |  | — |  | 3,416 |  | —
Interest rate swap |  | 11,379 |  | — |  | 11,379 |  | —
Total assets |  | 27,111 |  | — |  | 27,111 |  | —
Liabilities: |  |  |  |  |  |  |  |
Interest rate swap |  | 1,359 |  | — |  | 1,359 |  | —
Foreign exchange forward contracts |  | 5,121 |  | — |  | 5,121 |  | —
Total liabilities |  | 6,480 |  | — |  | 6,480 |  | —
Foreign exchange option and forward contracts The Company entered into certain foreign currency derivative contracts to protect against volatility of future cash flows caused by the changes in foreign exchange rates. The foreign currency derivative contracts do not qualify for hedge accounting and, as a result, the changes in fair value of the foreign currency derivative contracts are recognized in the consolidated statements of operations. The Company’s foreign currency derivative instruments relate to foreign exchange options or forward contracts involving major currencies such as Canadian dollars, British pounds, European euros and Japanese yen. Since its derivative instruments are not traded on an exchange, the Company values them using valuation models. Interest rate yield curves and foreign exchange rates are the significant inputs into these valuation models. These inputs are observable in active markets over the terms of the instruments the Company holds, and accordingly, the fair value measurements are classified as Level 2 in the hierarchy. The Company considers the effect of its own credit standing and that of its counterparties in valuations of its derivative financial instruments. Commodity hedge During the year ended December 31, 2015, the Company entered into a fixed for floating energy commodity swap with a financial institution to hedge cash flows associated with electricity sales of the Astoria project in the U.S. for the period between expected COD and commencement of the long term PPA with the off taker in January 2019. The swap contract was designated as a cash flow hedge at inception and is anticipated to be effective through its two-year term that ends on December 31, 2018. The fair value of the swap contract was $3,416 and $nil, an asset position, recorded in derivative assets on the balance sheet at December 31, 2017 and 2018, respectively. The effective portion of gains and losses on derivatives designated as cash flow hedges are initially deferred in other comprehensive income before being recognized in the statements of operations in the same period as the hedged transactions are reflected in earnings. Gains and losses on derivatives that are not designated or fail to qualify as effective hedges are recognized in the statements of operations as incurred. Fair value of the commodity swap is determined using pricing models developed based on the underlying commodity price of electricity and adjusted to reflect nonperformance risk of the counterparty and the Company, as necessary, which are considered Level 2 inputs. Interest rate swap During the year ended December 31, 2016, the Company entered into fixed for floating interest rate swaps with two financial institutions to hedge the interest rate risk on its project debts obtained in the United Kingdom with notional amount totaling GBP78.4 million ($96.8 million), which will expire between 2033 and 2034. The interest rate swaps had been designated as cash flow hedges for accounting purposes. Together with interest rate swap contracts of total notional amounts of approximately $399.0 million entered into for Recurrent projects upon the exercise of the swaption and designated as cash flow hedges, the total estimated fair value of the swap contracts was recorded as derivative assets of $3,810 and derivative liabilities of $nil on the balance sheet as of December 31, 2018. The effective portion of gains and losses on derivatives designated as cash flow hedges are initially deferred in other comprehensive income before being recognized in the statements of operations in the same period as the hedged transactions are reflected in earnings. Gains and losses on derivatives that are not designated or fail to qualify as effective hedges are recognized in the statements of operations as incurred. The estimated fair value of interest rate swaps was measured based on observable market data, which are considered Level 2 inputs. The fair value of derivative instruments on the consolidated balance sheets as of December 31, 2017 and 2018 and the effect of derivative instruments on the consolidated statements of operations for the years ended December 31, 2016, 2017 and 2018 are as follows:
|  | Fair Value of Derivative Assets
|  | At December 31, 2017 |  | At December 31, 2018
|  | Balance Sheet Location |  | Fair Value |  | Balance Sheet Location |  | Fair Value
|  |  |  | $ |  |  |  | $
Foreign exchange forward contracts |  | Derivative assets— current |  | 12,316 |  | Derivative assets—current |  | 4,166
Foreign exchange option contracts |  | Derivative assets— current |  | — |  | Derivative assets—current |  | 1
Commodity hedge |  | Derivative assets—current |  | 3,416 |  | Derivative assets—current |  | —
Interest rate swap |  | Derivative assets— current |  | 468 |  | Derivative assets—current |  | 594
Commodity hedge |  | Derivative assets— non-current |  | — |  | Derivative assets—non-current |  | —
Interest rate swap |  | Derivative assets—non-current |  | 10,911 |  | Derivative assets—non-current |  | 3,216
|  | Total |  | 27,111 |  | Total |  | 7,977
|  | Fair Value of Derivative Liabilities
|  | At December 31, 2017 |  | At December 31, 2018
|  | Balance Sheet Location |  | Fair Value |  | Balance Sheet Location |  | Fair Value
|  |  |  | $ |  |  |  | $
Foreign exchange forward contracts |  | Derivative liabilities—current |  | 5,120 |  | Derivative liabilities—current |  | 13,480
Foreign exchange option contracts |  | Derivative liabilities—current |  | — |  | Derivative liabilities—current |  | 218
Warrants |  | Derivative liabilities—current |  | — |  | Derivative liabilities—current |  | —
Interest rate swap |  | Derivative liabilities—current |  | 1,001 |  | Derivative liabilities—current |  | —
Interest rate swap |  | Derivative liabilities—non-current |  | 359 |  | Derivative liabilities—non-current |  | —
|  | Total |  | 6,480 |  | Total |  | 13,698
|  |  |  | Amount of Gain (Loss)
|  |  |  | Recognized in Statements
|  | Location of |  | of Operations
|  | Gain (Loss) Recognized |  | Years Ended December 31
|  | in Statements of Operations |  | 2016 |  | 2017 |  | 2018
|  |  |  | $ |  | $ |  | $
Foreign exchange forward contracts |  | Gain (loss) on change in fair value of derivatives |  | 4,798 |  | (2,638) |  | (16,414)
Foreign exchange option contracts |  | Gain (loss) on change in fair value of derivatives |  | — |  | — |  | (2,023)
Warrants |  | Gain (loss) on change in fair value of derivatives |  | 24,554 |  | 711 |  | —
Commodity hedge |  | Gain (loss) on change in fair value of derivatives |  | 75 |  | — |  | —
Interest rate swaption |  | Gain (loss) on change in fair value of derivatives |  | (4,335) |  | — |  | —
Interest rate swap |  | Gain (loss) on change in fair value of derivatives |  | 2,230 |  | 1,655 |  | (793)
|  | Total |  | 27,322 |  | (272) |  | (19,230)
The Company measures certain long-lived assets or long-term investments at fair value on a non-recurring basis in periods after initial measurement in circumstances when the fair value of such assets is below its recorded cost and impairment is required. The Company recorded impairment charges for certain manufacturing asset group of $22,757, $11,626 and $30,968 for the years ended December 31, 2016, 2017 and 2018, respectively. The fair value of these assets was measured based on prices offered by unrelated third-party willing buyers and classified as level 3 fair value measurements as the offering prices are not observable. The impairment was recorded in general and administrative expenses of the MSS segment. The Company also holds financial instruments that are not recorded at fair value in the consolidated balance sheets, but whose fair value is required to be disclosed under the U.S. GAAP. The carrying values of cash and cash equivalents, restricted cash, trade receivables, billed and unbilled, amounts due from related parties, accounts payables, short-term notes payable, amounts due to related parties and short-term borrowings approximate their fair values due to the short-term maturity of these instruments. Long-term borrowings were $404,341 and $393,614 as of December 31, 2017 and 2018, respectively, which approximate their fair values since most of the borrowings contain variable interest rates. The fair value of long-term borrowings was measured based on discounted cash flow approach, which is classified as level 2 as the key inputs can be corroborated with market data. The carrying value of the Company’s outstanding convertible notes was $126.5 million and $127.4 million as of December 31, 2017 and 2018, respectively, which approximates the fair value.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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